Borussia Dortmund — The roar of the fans

Borussia Dortmund has been one of the most successful German football clubs for decades. FY21, was challenging from a financial perspective due to the COVID-19 related restrictions, but on the pitch it was a relatively successful year: winning the DFB Pokal, reaching the quarter finals of the Champions League, and finishing third in the Bundesliga, guaranteeing its place in the Champions League for the ninth time in the last 10 seasons.

The corporate strategy has been to make its financial success less dependent on short-term sporting success by increasing the domestic and international marketing of the brand. Coupled with this, the team’s sporting success must be sustainable (ie without taking on new debt). The relatively consistent on-the-pitch success has enabled the company to generate long-term revenue growth of c 12% from multiple revenue sources, while increasing the relative predictability of those revenues. The strength of the brand is reflected in over 42 million followers across social media platforms.

To reflect the more optimistic outlook with the gradual return of fans to the stadium through the season, we upgrade our forecasts for FY22 and introduce forecasts for FY23. We assume a gradual build to full capacity from H222 and effective capacity for the season of 78% (70% previously). Our FY22e estimates are broadly in line with management’s new guidance, with year-on-year growth in revenue of c 13% to €377m and EBITDA of c 150% to €97m. In FY23, we estimate 7% revenue growth to €404m and 18% EBITDA growth to €114m.

We value Borussia Dortmund using an asset-backed sum-of-the-parts, which separately values the playing squad, the club’s brand (last quoted valuation adjusted to reflect estimated market movements) and other assets (at net book value). Our valuation of €11.56/share is at a premium of 142% to the current share price. Using more traditional multiples, the current FY22e EV/sales multiple of 1.4x is at a significant discount to the long-run average of 1.6x, and a little above more recent low multiples (1.0–1.3x), suggesting strong upside potential.

Borussia Dortmund was formed as Ballspielverein Borussia e.V. Dortmund (Borussia club for ball games) in 1909, hence the BVB 09 logo. ‘Borussia’ was taken from the brewery name Borussia-Brauerei, today known as Dortmunder Actien Brauerei (DAB). Since its formation in 1909, it has become one of Germany’s most successful football clubs and one of the most valuable global football clubs and brands. The company was listed in October 2000, becoming the first publicly traded football club on the Frankfurt Stock Exchange. It remains one of the few quoted European football clubs, with an investible free float of 72.27%.

Domestically, the club has won eight national championships (named the Bundesliga since 1964), five DFB-Pokals (the German knockout cup competition) including in 2020/21, and six DFL-Supercups (played towards the start of a new football season between the winners of the Bundesliga and the DFB-Pokal from the prior season).

Internationally, Borussia Dortmund became the first German team to win a European competition, the European Cup Winners’ Cup in 1966, and won the Union of European Football Associations’ (UEFA’s) most important and financially lucrative competition, the Champions League, in 1997. In the same season, it won the Intercontinental Cup, today known as the FIFA Club Word Cup, played between the champions of the Champions League and the South American equivalent, Copa Libertadores.

In Exhibit 3 we show Borussia Dortmund’s finishing position (quoted) in the Bundesliga in every season since FY01, when the company was listed, of the 18 competing teams, as well as that of its main competitor, Bayern Munich. We also show the lowest finishing position required to compete in the Champions League or the UEFA/Europa Cup in the following season. In the last 10 seasons, the team has finished in the top four of the Bundesliga on nine occasions.

Exhibit 4 reinforces Borussia Dortmund’s relatively consistent long-term success, showing the cumulative statistics for the top 10 teams in the Bundesliga 1 since FY01. Of the 38 teams to have competed in Bundesliga 1 since then, Borussia Dortmund ranks as the second most successful team in terms of points won, games won, games lost, goals scored and goals conceded. There is a survivorship bias given the worst-performing teams are relegated every season, and the long-term record omits the rise of new challengers. Borussia Dortmund is one of only six teams in the 38 that competed in Bundesliga 1 over that time to feature in every season. In Exhibit 5 we show the same statistics for the last five seasons to capture more recent form.

After listing in 2000, the company was at risk of bankruptcy in 2005, broadly attributed to extravagance, notably on foreign players, after winning the Bundesliga in 2002. New management (the current CEO and CFO) implemented a reorganisation programme, including restructuring liabilities through a long-term, fixed-interest loan from Morgan Stanley, cost-cutting, and a strategy of revenue development and sustainable investment in players. Key initiatives included repurchasing the stadium, eliminating high rental costs and early repayment of the loan via a long-term agreement with marketing partner Sportfive, while early extension of flagship contracts endorsed the advertising strategy. A c €140m fund-raising in 2014, backed by key sponsors and new partnerships, was a strong endorsement of the strategy. In October 2021, the company raised further equity with gross proceeds of €86m in order to repay the financial debt taken on during the COVID-19 pandemic and provide flexibility in the event of further COVID-19 related restrictions.

The listed company, which runs the professional football club, is Borussia Dortmund GmbH & Co KGaA, a hybrid corporate entity that combines elements of a limited partnership (ie KG or Kommanditgesellschaft) and one limited by stocks (ie AG or Aktiengesellschaft).

The share capital of the KGaA is divided into shares that are held by at least one shareholder that has unlimited liability (referred to as the general partner) and other shareholders that have limited liability (ie the listed shares). The KGaA does not have an executive board but is run by the general partner, with sole legal authorisation to manage and represent the KGaA.

Borussia Dortmund Geschäftsführungs GmBH is the general partner of the KGaA. The sole owner of this GmBH is the founding football club, Ballspielverein Borussia 09 e.V. Dortmund. This ownership of the GmBH provides effective majority ownership of the KGaA to the football club. This legal structure was designed to ensure a tight legal connection between the football club and the company. The managing directors of the GmBH are Hans-Joachim Watzke, Thomas Treß and Carsten Cramer.

The share capital of the KGaA following the October 2021 capital rase was held by the following key shareholders: Bernd Geske (8.24%), Evonik Industries (8.19%), Signal Iduna 5.98%, Puma 5.32%, Ballspielverein Borussia 09 e.V. Dortmund 4.61%, and Ralph Dommermuth Beteiligungen (ie the owner of 1&1) 4.17%, leaving a free float of 72.27%. Evonik, Signal Iduna, Puma and 1&1 are long-term club partners, or sponsors, which are typically encouraged to have a shareholding in the company. Bernd Geske is a member of the supervisory board of the KGaA and belongs to the circle of friends of the Council of Elders of Ballspielverein Borussia 09 e.V. Dortmund.

Under DFL (the German Football League) rules, the so-called 50+1 rule was introduced in 1998. The rule requires clubs (ie the fans) hold a majority of the voting rights in order to play in the Bundesliga and commercial investors may not hold more than a 49% stake in the company. The rationale behind the rule is the clubs should be run in accordance with the wishes of the supporters, to keep ticket prices low, and to keep debts and wages under control. The rule prevents an outside investor taking over football clubs.

Following the club’s financial troubles in the mid-2000s, the corporate strategy was to establish itself as the leading German football club after Bayern Munich, and to make its financial success less dependent on short-term sporting success by increasing the domestic and international marketing of the brand name in order to grow the core revenue sources.

As identified above, it is clear the company has successfully established itself as a leading German football club. Now the strategy is to defend its position in the top flight of the Bundesliga, while continuing to further develop the brand and enhance its multiple revenue streams.

The team’s sporting success needs to be sustainable (ie without taking on new debt) and achieve a balance between the company’s financial interest and its sporting interests, which can sometimes conflict, that is a player may be sold based on financial considerations rather than the potential impact it may have on the team’s performance in the future.

The key structural growth drivers for the business are: the team is one of the most successful and well-known German football clubs, with one of the highest average number of spectators in Europe, and Germany is one Europe’s largest football markets, but lags behind other markets in terms of media exploitation rights.

Borussia Dortmund reports revenue from five sources: Match Operations (ticket receipts for attendance at games), Advertising (sponsorship and advertising from companies), TV Marketing (broadcast rights), Merchandising, and Conference, Catering & Miscellaneous.

Below we show how the revenue sources have evolved since FY05, when IFRS was adopted. We have combined Merchandising and Conference, Catering & Miscellaneous revenues into ‘Other’ as there was a minor change to revenue disclosure between FY14 and FY15.

Borussia Dortmund’s revenue has grown from €75m in FY05 to €334m in FY21, a CAGR of c 10% pa, significantly ahead of German GDP growth. Excluding the COVID-19 affected years FY20 and FY21, the revenue CAGR through FY19 was c 12%.

TV Marketing had become the most important source of revenue, increasing from 20% of the total in FY05 to 46% in FY20. Advertising was the second most important revenue source at 26% of the total, having been the most important revenue source in FY05 at 36%. These have led to an increasing proportion of more predictable revenues.

Revenue has declined in only four years since FY05, two (FY09 and FY18) followed seasons in which the team achieved greater success than in a typical year, and two (FY20 and FY21) were due to the effects of COVID-19.

Before a change in accounting standards in FY20, Borussia Dortmund included gross revenue from transfer deals in total group revenue. The charts above exclude transfer deal revenue, which, due to its nature, fluctuates between financial years. In this note we refer to revenue before transfer deals, unless stated otherwise. For completeness, Exhibit 8 shows revenue including transfers.

TV Marketing is revenue earned from the broadcasting rights of the games played by the team. It has grown at a CAGR of c 17% since FY05 and by 19% since FY11 due to inflation in media rights from increased demand for premium content from competing media platforms and the team’s improved and more consistent on-pitch success. It is the company’s most important revenue source, with a high degree of visibility in the near and medium term for the largest revenue source (ie domestic (Bundesliga rights)), whereas International TV and Domestic Cup are more dependent on success on the pitch.

Marketing of media rights is conducted centrally by the organisers of their respective competitions (the Bundesliga and UEFA), hence it is outside Borussia Dortmund’s control. However, the system of revenue distribution to clubs is defined well in advance, which provides a high level of visibility.

The German broadcasting rights for the four seasons 2021/22 to 2024/25 were sold for €4.4bn, a reduction of c €240m or 5% from the prior contract. The lower proceeds reflected the timing of the auction during the height of economic uncertainty and COVID-19 lockdowns. The prior domestic Bundesliga contract for the four seasons 2017/18 to 2020/21 was worth €4.64bn or €1.16bn per season, an increase of c 85% on the prior contract for four seasons 2013/14 to 2016/17 of €2.5bn in total or €625m per season. This has been helped by the persistent emergence of new entrants to the media landscape. Management believes there is significant opportunity to further develop Bundesliga rights; it estimates 2020–21 Bundesliga broadcasting revenue of €1.4bn, versus Spain’s La Liga at €2bn and England’s Premier League at €3.4bn.

Distributions from the broadcasting rights are made based on four ‘pillars’, or criteria, including the ranking of the teams over different time periods and the playing time of younger players, to encourage youth development, versus two pillars previously. Distributions from international rights are made based on three pillars, with a proportion shared equally between the clubs and the remainder based on performance. In order to help the clubs manage the financial impact of the COVID-19 pandemic, in the first two years of the current contract, a lower share will be split based on team performance, increasing revenue to smaller clubs at the detriment of the larger clubs.

UEFA is responsible for the centralised marketing of all media and commercial rights for all European club competitions, and subsequent distributions to competing clubs. The rights are typically sold in three-year cycles: the current cycle covers the seasons from 2021/22 to 2023/24. The current rights in Germany are held by Amazon, DAZN and ZDF. Distributions to Champions League participants are based on four ‘pillars’: 25% to the clubs that participate in the group stage; 30% for performance in the latter knockout stages of the competition (ie Round of 16 onwards) with escalating fees per game (Borussia Dortmund is currently second in its group after three games); 30% based on a coefficient that ranks a team’s 10-year relative success in the competition (the newly added pillar) and 15% based on the value of the club’s own TV market relative to all countries (ie the market pool).

Advertising is the sponsorship income from Borussia Dortmund’s key corporate partners as well as advertising on the billboards in the ground and bonuses dependent of the team’s success. It has grown at a CAGR of 9% since FY05.

Despite the challenging environment due to the COVID-19 pandemic, Advertising increased by c 9% to €107m in FY21. The increase was mainly due to new sponsorship deals or extensions to existing major ones(Evonik, 1&1 Telecommunications) and higher prize money, offset by declines in sponsor hospitality and match day advertising due to the pandemic.

Sponsorship revenue is typically earned from multi-year contracts, although there are annual contracts too, with leading international and regional companies that want to be connected with sporting success and to promote their brands. The company has a proven ability to renew at higher prices or by attracting new partners (sponsors).

The company’s principal partners, representing approximately half of total Advertising revenue, are:

Prior to splitting sponsorship of the shirt by competition from FY21, Evonik was the sole shirt sponsor since July 2006. Opel became the team’s first ever shirt sleeve sponsor from FY18, when clubs were allowed to find their own partners, prior to which sleeve sponsorship of all Bundesliga teams was sold under a centralised deal. Principal partners tend to be shareholders of the company in order to strengthen the relationship with the club.

In addition to the principal partners above, there are three different levels of partner, which contribute differing levels of income in return for varying levels of sponsorship benefits: BVB ChampionPartner (11partners including Opel, bwin and FIFA 22), BVB PremiumPartner (nine partners including Coca-Cola, L’Oréal and Eurowings) and BVB Partner (19 partners including ARAL and H-Hotels.com).

We believe the long-term principal partnerships represent over half of Borussia Dortmund’s advertising and should be relatively predictable given the multi-year relationships. For other partners, it is likely some revenue is sensitive to the economic cycle.

The activity of seeking new sponsors is currently outsourced to Sportfive, a media group, which receives a commission on revenue generated. For Borussia Dortmund, commission and expenses are reported as Advertising within other operating expenses. Over time, the effective commission rate has reduced from 31% of reported advertising revenue to 25/26%, but a new licensing agreement in FY21 reduced the agency commission and led to a significant 60% y-o-y reduction in the expense to €10.7m, now equivalent to 10% of revenue.

Match Operations represents revenue earned from the attendance of fans at its home ground, Signal Iduna Park, as well as from friendly games played by the team including overseas tours, which typically take place before the start of the new season and during the winter break.

Management regards Signal Iduna Park, Germany’s largest football stadium with capacity for 81,365 fans, as its most valuable asset apart from the team.

The COVID-19 pandemic severely affected revenue due to the initial postponement of games in FY20 and subsequent restrictions on the level of fan attendance at games and travel on promotional overseas tours. Excluding FY20 and FY21, the revenue CAGR from FY05–19 was c 7%. Key drivers of growth have been minor increases in capacity, price increases and greater on-pitch success, which has led to more appearances in European competitions.

Within Match Operations, the company separately discloses revenues from domestic (Bundesliga games), international (UEFA competitions), national cup (DFB-Pokal) and friendlies (tours).

Revenue is a function of the number of games played, the number of fans attending and price per ticket. In ‘normal’ circumstances, there is a relatively predictable element to domestic revenue, the most significant source of revenue, as there are 17 home Bundesliga games in every season, which are typically sold out. Over the long term, there has been a gradual increase in the capacity of the stadium as the ground has been updated, and management’s policy with respect to ticket prices is typically to grow them by inflation. The club benefits from the advance sale of 55,000 season tickets, which brings revenue visibility. The ticket price varies depending on location in the ground, the competition and opposition being played and concessions.

Revenue from other competitions is less predictable given these include knockout competitions and revenues are shared in different ways. For example, net income (revenue less stadium costs) from DFB-Pokal games is split equally between the two competing teams, and in the latter stages of the Champions League the home team receives all of the ticket income.

In 2020/21 the majority of homes games were played behind closed doors. For the start of the FY22 season, the Bundesliga ruled most clubs were allowed to operate with a 50% stadium capacity or a maximum of 25,000 fans (c 30% capacity for Borussia Dortmund). From the middle of October up to 67,000 fans (c 82% capacity) are permitted at the stadium, and management hopes to return to full capacity in the second half of the season.

In Exhibit 12, we aggregate a number of revenue streams into ‘Other’, due to the change in disclosure between FY13 to FY14. Prior to COVID-19, the revenue CAGR was 11% pa. As well as the more obvious revenue streams, it includes booking fees for the sale of tickets and fees received for squad players who represent their national teams, so can be variable

Merchandising represents the award of licences and revenue from the sale of team merchandise (eg replica team kits). In addition to partners’ wholesale distribution channels, sales are made via a major FanWelt centre near the stadium, branded stores (FanShops) in Dortmund, sales kiosks at the stadium and e-commerce (www.bvbonlineshop.com). Growth should be driven by the increasing global appeal of the brand, as well as the company’s ability to increase and improve the range of merchandising.

Conference and catering is closely linked to attendance at the stadium as well as the company’s ability to monetise improved (ie higher value) hospitality.

Borussia Dortmund’s strategy has been the development of a competitive team with a focus on identifying promising young players at minimal cost (even free), who can then be further developed at the BVB Academy. It currently has a worldwide network of about 30 scouts.

Over the long term, Borussia Dortmund has a proven track record of prudent investment in talent. Below, we show the net transfer spend per season (amount received less amount spent on the squad) since the 2010/11 season for the first team squads of a range of Borussia Dortmund’s competitive peers, including the large/leading clubs in Germany and Europe. We also include cumulative totals for the 12 seasons from 2011–22 and the 22 seasons from 2001–22.

Borussia Dortmund has been the only the club to generate a net surplus on transfers from 2001–22 and 2010–22, testimony to its ability to recruit and trade talent over the long term. The cumulative figures are helped by the exceptional profits in 2017/18 from the sale of two players. Although there is an element of subjectivity in valuing the current squad, the above provides some comfort there is unrealised value in the current squad versus its book value.

According to www.transfermarkt.com Borussia Dortmund has the 11th most valuable first-team squad of 500 football teams valued globally, with an estimated value of c €604m versus the purchase cost of €306m. Below we show the estimated market values in descending order for the top 20 most valuable global football squads.

The above suggests Borussia Dortmund’s squad has increased in value by 3% over the last 12 months, while the value of many other clubs has declined. The above includes players on loan; when these are excluded the current first team squad valuation is €579m (see below).

The current first-team squad is shown below. The combined estimated values for Haaland (€150m) and Bellingham (€70m) represent c 38% of the adjusted squad valuation of €579m, and are testimony to the club’s scouting system, having been purchased for €20m and €23m respectively. Haaland’s contract ends in 2023/24 but given his phenomenal success he has been closely linked with the majority of the larger European football clubs already. We believe Haaland has a release clause in his contract in the summer of 2022 for €75m but given the level of interest from many clubs it is likely to be exceeded. Bellingham was signed in 2020/21, and has established himself as a first-team regular and appeared for the English national squad.

In the FY21/22 season to date there have been a total of 11 arrivals (including loans) and seven departures (including loan movements) from the club for a net spend of €63m. The most significant departure was Jadon Sancho to Manchester United for €85m, whose estimated market value in October 2020 was €117m, and is currently €100m. To determine whether there is a consistent upward bias in the valuations versus eventual transfer fees, we have examined Borussia Dortmund’s transfers that resulted in a fee during the last five years and compared the fee to estimated value. Over the five years, the fees realised were 12% higher than estimated market values, with a wide range of apparent under and over valuations for individual players. The average can, naturally, be skewed by significant one-off gains, for example Dembélé was sold for €135m versus an estimated market value of €33m. Excluding this transfer, the cumulative realised transfer fees were 6% lower than the estimated market values. Therefore, we believe the estimated market values are a reasonable proxy for the aggregate squad valuation over the long term.

We have highlighted the growth drivers of Borussia Dortmund’s revenues in the individual sections above.

FY21 revenue declined by c 10% to €334m, EBITDA by c 38% to €39m and reported EPS was negative €0.79 versus negative €0.48 in FY20. Revenue was in line with our expectations of €335m, as higher Advertising was offset by marginally lower Merchandising than expected. EBITDA of €39m (margin 11.7%) was above management’s most recent guidance issued with Q321 results of €33m (raised from €25–30m).

The relatively strong EBITDA performance was due to robust cost control: personnel expenses (64% of revenue) flat year-on-year, depreciation and amortisation (33% of revenue) up 5%, and other operating expenses (26% of revenue) declined by 28% y-o-y.

Management guides to a strong recovery in FY22 revenue excluding transfers of €374m, y-o-y growth of c 12% It expects higher revenue from Advertising, Match Operations, and Conference and Catering. The guidance is marginally ahead of pre-lockdown (FY19) revenue of c €370m. In addition, it expects to generate €110m of gross transfer proceeds (including €85m for Jadon Sancho) to give revenue including transfers of €484m, year-on-year growth of c 35% from FY21’s €359m. At the net income level, management expects to report a net loss of €12–17m, an operating loss of €10–15m, and EBITDA of €92–97m.

In Exhibit 17 we show our new forecasts for FY22 and introduce forecasts for FY23. Our typical working assumption is that the team finishes in the top four of the Bundesliga and qualifies from its Champions League group stage.

In the absence of further COVID-19 related restrictions, we forecast year-on-year revenue growth of c 13% in FY22 to €377m and a further 7% increase in FY23 to €404m. The most significant contributors to the €70m revenue growth from FY21 to FY23 are: Match Operations (+€45m); Conference, Catering etc (+€24m); and Advertising (+€18m); offset by a €19m reduction in TV Marketing. Revenue growth and a €10m absolute increase in forecast net transfer income in FY22 leads to EBITDA growth of 150% in FY22 (€97m) and 18% in FY23 (€115m). The FY23 revenue forecast of €404m compares with FY19’s pre-COVID-19 revenue of €370m, and the FY23 EBITDA forecast of €115m is similar to FY19’s €116m.

During FY22 we assume fan attendance will be c 78% of the total available capacity, including a gradual build through H122 and full capacity for H222. The better attendance should lead to growth for Match Operations and other associated revenues such as drinks and food at the stadium.

We increase our forecasts for net transfer income to €60m in both FY22 and FY23 versus €15m realised in FY21 to reflect an expected more buoyant transfer market. Given the unpredictable nature of player transfers, we typically estimate future transfers as an average of activity in the prior three years. In FY19–21 Borussia Dortmund reported net transfer income of €83m, €40m and €15m, a three-year average of €46m. As FY21 was negatively affected by the COVID-19 outbreak, we feel it is more appropriate to assume an average of the more typical non-COVID-19 affected years, that is FY19 and FY20, of €60m. In FY22, this is supported by the sale of Sancho for gross proceeds of €85m and an expected benefit to EBITDA of €56m.

We assume zero effective tax in FY22 and FY23 given the corporate tax loss carry forward of €119m and trade tax loss carry forwards of €100m. For normalised earnings we assume a tax rate of 8%.

The growth in EPS in FY22 and FY23 is lower than the growth in net income due to the October 2021 share issue (see below).

Given the expected net loss of €13m in FY22 and modest net profit of €2m in FY23, we assume no dividend will be proposed.

Despite the challenging operating environment, the company generated positive operating cash flow after interest of €16m in FY21, an improvement from the FY20 outflow of €0.4m. The net debt position increased from €29m at end FY20 to €76m. In aggregate there was lower year-on-year investment in the squad and fixed assets (€92m versus €159m in FY20) and lower transfer proceeds (€30m versus €108m in FY20). Prior to the COVID-19 pandemic, the company typically operated with a year-end net cash position. Following the period end, the company announced the sale of Jadon Sancho for €85m, and in October 2021 an equity raise with gross proceeds of €86.2m was completed. The company issued 18.4m new shares, one new share for every five shares already held, at a price of €4.7, a discount of 24% to the €6.2 share price when the raise was announced.

Our new profit forecasts lead to operating cash flow generation post interest in FY22 and FY23 of €12m and €50m respectively. We assume capex of €6m pa and net investment in the playing squad of €3m pa, including gross investment of €88m, in line with FY21, but higher proceeds of €85m (equivalent to Sancho’s proceeds) in both years. We assume the new debt raised during FY21 of €57m is repaid in FY22 using the proceeds from the equity raise. By year-end FY22 these lead to a forecast net cash position of €13m, and a further improvement to €54m by the end of FY23.

The net loss generated in FY21 led to a reduction in net assets to €233m from €305m at end FY20. Intangible assets (€193m), mainly the playing squads, and tangible assets (€183m) represented the bulk of the total asset base of €451m. The most significant liability was closing gross debt of €78m, including short-term debt of €57m (to be repaid in FY22) and leases of €21m.

We typically value Borussia Dortmund using an asset-backed sum-of-the-parts valuation, taking into account the potential unrealised value of the football squads and the brand name. Our valuation of €11.56 a share is a premium of 142% to the current share price of €4.77. The share price is lower than the value of the squad in isolation, or at a modest premium to our estimate of the brand value in isolation, implying a lower value is being attributed to at least one of them.

The current value of all of Borussia Dortmund’s footballing squads (ie the Bundelsiga, UEFA under 19s, 3. Liga and the junior team) is €610m (source: www.transfermarkt.com), including €579m for the Bundesliga first-team squad. To this we apply a discount of 8%, which is the average cost of transfers, expensed through the income statement, since FY19. The squad valuations are a premium of 192% to the June 2021 book value of €192m, which still includes Sancho, therefore the comparison is not on a like-for-like basis. Management’s long-term record in realising gains on players disposals provides comfort the squad market values are at a premium to book value. The book value of the squad at June 21 was equivalent to €1.74/share, and the unrealised gain of €392m represents €3.34/share.

The last quoted valuation of the Borussia Dortmund brand by Brand Finance of US$587m was made in May 2018, equivalent to €506m at the current exchange rate of US$1.18/€. To estimate the potential change in brand value, we use the change in the market values of Borussia Dortmund’s listed peers since the end of May 2018 as a proxy.